Deals: The Return of Billion-Dollar M&A?

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A sudden rush of billion-plus-dollar deals led to one of the bigger weeks for mergers and acquisitions in this otherwise dreary first quarter. There seemed to be little suggestion, though, that this was the beginning of a full-scale upturn.

Led by British publisher Reed Elsevier Group plc’s $4.17 billion offer for identification and credentialing software company ChoicePoint Inc. — a deal that carried a premium of 48.5 percent — the week contained 37 deals totaling a healthy $12.35 billion, according to data provided to CFO.com by mergermarket.

That brought year-to-date volume to $65.43 billion, based on 488 transactions. In the prior week, 59 deals were struck, although their volume totaled only $7.5 billion. There was only one billion-dollar deal among them.

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We noted last week that private equity had accounted for a strong segment of the North American dealmaking: nine of the transactions, worth $1.98 billion. However, private equity retreated again in the most-recent seven days, with only three deals reported, worth $198 million.

The comparisons with last year’s record M&A pace remained dramatic. For the year-to-date in 2007, $241.15 billion of deals — 790 in all — already had been struck. That’s nearly four times the total so far this year. The 488 transactions this year contrasts with 790 in the similar swath of 2007.

The M&A community remains attentive to some big potential deals that are in the buzz — led by a possible blockbuster stemming from Microsoft’s $40-billion-plus hostile pursuit of Yahoo. U.S. airlines have been at the center of some speculation. And globally, in the continually active mining sector, the tussle by BHP Billiton for control of Rio Tinto suggests there could be much more M&A fallout ahead.

The deal summary also missed by a day Sunday’s $2-billion bid by Electronic Arts for gamemaker Take-Two.

Reed Elsevier Group plc to buy ChoicePoint Inc. for $4.17 billion

Alpharetta, Ga.-based Choicepoint, a provider of identification and credential verification software, definitively agreed to be acquired by London-based Reed Elsevier Group plc, a publisher and information provider. Both boards approved the merger for $50 per Choicepoint share, a premium of 48.5 percent. The implied equity value of the transaction is about. $3.6 billion, considering the debt to be assumed. The transaction is expected to close in the summer.Seller financial advisor: Goldman Sachs; and WachoviaBidder financial advisor: JPMorgan Cazenove; Morgan Stanley; and UBSSeller legal advisor: Wachtell Lipton Rosen & KatzBidder legal advisor: Sullivan & Cromwell

WebMD Health Corp. to buy HLTH Corp. for $2.17 billion

Elmwood Park, N.J.-based HLTH Corp. definitively agreed to be merged into its 84-percent owned WebMD Health Corp. subsidiary, with both boards approving the merger. HLTH also said it intends to divest its ViPS and Porex businesses, which have received interest from potential strategic buyers, although the divestitures are not dependent on the merger and do not require shareholder approval. HLTH provides healthcare related services and products through its WebMD, ViPS, and Porex businesses. New York-based WebMD provides health information services to consumers, physicians, healthcare professionals, employers, and health plans through public and private online portals and health-focused publications. The merger is expected to capitalize WebMD with about $700 million in cash and investments. Terms call for $6.89 in cash and 0.1979 of a WebMD share to be exchanged for each HLTH share, with the $12.625 total offering a premium of 25.6 percent. The implied equity value is about $2.31 billion, not considering HLTH’s cash position. This cash portion may be subject to downward adjustment based on the amount of proceeds received from the disposition of HLTH’s investment in certain auction rate securities (ARS). HLTH currently has about $195 million worth of ARS, which excludes any held by WebMD. If either ViPS or Porex has not been sold at the time the merger is ready to be consummated, WebMD may issue up to $250 million in redeemable notes to HLTH shareholders in lieu of a portion of the cash consideration otherwise payable in the merger. The merger will eliminate both the controlling class of WebMD stock held by HLTH and WebMD’s existing dual-class stock structure. WebMD’s share count will be reduced by 20 percent and HLTH shareholders will own approximately 80 percent of WebMD when the deal is complete. WebMD’s senior management team will remain in place under CEO Wayne Gattinella. The transaction is expected to close in the second or third quarter.Seller financial advisor: Raymond James & AssociatesBidder financial advisor: Morgan JosephSeller legal advisor: O’Melveny & MyersBidder legal advisor: Cahill Gordon & Reindel

Barrick Cortez Inc., a subsidiary of Toronto-based gold mining company Barrick Gold Corp., acquired the 40 percent of Cortez Gold Mine, of Crescent Valley, Nev., that it didn’t own. The seller is the Kennecott Explorations (Australia) unit of London-based Rio Tinto plc, which produces aluminum, copper, diamonds, energy products, gold, and industrial minerals. Cortez Gold Mine has been a joint venture 40 percent run by Kennecott and 60 percent by Barrick Cortez since 1968. Barrick will pay a gross royalties on a sliding scale on 40 percent of all future production in excess of 15 million recovered ounces from Jan. 1, 2008, with Barrick also making a conditional lump-sum payment of $50 million if it adds additional 12 million ounces of contained gold resources to the Dec. 31, 2007, reserve statement for Cortez. The transaction is expected to close in first quarter.Seller financial advisor: RothschildBidder financial advisor: Not AvailableSeller legal advisor: Not AvailableBidder legal advisor: Not Available

San Jose-based KLA-Tencor, a yield management and process control provider, agreed to acquire Leuven, Belgium-based ICOS Vision Systems, which develops and supplies inspection products for the back-end semiconductor manufacturing and electronic assembly industries. Terms call for a price of $53.75, a 35-percent premium. As part of the transaction, KLA-Tencor will offer to purchase at the bid price, under certain circumstances, the ICOS shares underlying all outstanding 2002 employee stock options and 2007 employee warrants. The acquisition will be accretive to KLA-Tenor’s earnings per share in the first year. The transaction is expected to be completed in the second quarter of 2008.Seller financial advisor: Not AvailableBidder financial advisor: Not AvailableSeller legal advisor: EubeliusBidder legal advisor: Davis Polk & Wardwell; and NautaDutilh

The Walt Disney Co. to buy 20 percent of UTV Software Communications Ltd. for $369 million

Burbank, Calif.-based multimedia company Walt Disney Co. made an open offer to acquire a 20 percent stake in UTV Software Communications Ltd., a Mumbai.TV software company. A cash tender offer will initiate the transaction after a share transaction agreement between Disney and UTV. The $21.60 price per share values the entire share capital at $840.55 million, but represents a pro-rated premium of 1.81 percent over the closing price of $20.79 on 18 Feb 2008, the last trading price prior to the formal announcement. UTV does not have outstanding convertible bonds. Assuming maximum acceptances of 20 percent, it requires cash consideration of $369 million. Disney owns a 14.85 percent stakes in UTV now, and 9.353 million shares will be issued to it under the share transaction agreements. When completem Disney would own a 52.9 percent stake in UTV, fully diluted. Unilazer Exports and Management Consultants Ltd. will be allocated 4.532 million convertible warrants on May 15. Seller financial advisor: Merrill LynchBidder financial advisor: Goldman SachsSeller legal advisor: AZB & PartnersBidder legal advisor: Amarchand & Mangaldas & Suresh A. Shroff & Co

InterGen Inc. to buy the Mexican plants of TransAlta Corp. for $304 million

Burlington, Mass.-based InterGen Inc. is a power generation company and a portfolio company of Toronto-based Ontario Teachers Pension Plan and AIG Global Investment Group of New York City. AIG Global is a holding company for subsidiaries engaged in asset management, investment advice, hedge funds, private equity, and real estate. The target consists of power plants in the Mexican states of Chihuahua and Campeche, and the seller is Calgary, Alberta-based TransAlta Corp., a power generation company. The acquisition includes a 252-megawatt plant in Campeche and a 259-megawatt plant in Chihuahua. Under the terms of the agreement, Intergen will retain all TransAlta’s Mexico assets, ensuring delivery of power under the long-term contract to the Comision Federal de Electricidad. The transaction is expected to close in the first quarter.Seller financial advisor: Not AvailableBidder financial advisor: JPMorganSeller legal advisor: Burnet Duckworth & PalmerBidder legal advisor: Paul Hastings Janofsky & Walker; and Galicia y Robles